We present evidence that banking development plays a key role in technological progress. We focus on firms’ innovative performance, measured by patent-based metrics, and employ exogenous variations in banking development arising from the staggered deregulation of banking activities across U.S. states during the 1980s and 1990s. We find that deregulation had significant beneficial effects on the quantity and quality of innovation activities, especially for firms highly dependent on external capital and located closer to entering banks. Furthermore, we find that these results are partly driven by a greater ability of deregulated banks to geographically diversify credit risk.
|Number of pages||49|
|Publication status||Published - 2012|
|Event||European Economic Association & Econometric Society : 2012 Parallel Meetings - University of Málaga, Málaga, Spain|
Duration: 27 Aug 2012 → 31 Aug 2012
|Conference||European Economic Association & Econometric Society|
|Location||University of Málaga|
|Period||27/08/2012 → 31/08/2012|